Fri December 20, 2013

The Cost To Keep The Home Team At Home May Not Be Worth It

Atlanta Mayor Kasim Reed announces that the city will demolish Turner Field after Major League Baseball's Atlanta Braves leave for a new stadium in the suburbs in 2017. Reed says it was a hard decision but he thinks the city will be better for it.

Employees enter Turner Field, the home of the Atlanta Braves baseball team.

David GoldmanAP

$498 million — that's how much the state of Minnesota and the city of Minneapolis have agreed to pay as their share of a new, nearly $1 billion football stadium for the Minnesota Vikings. Team owner Ziggy Wilf says he believes Minnesotans got a fair deal.

And as it turns out, the deal is pretty standard. But is it fair? Increasingly, privately owned sports teams aren't just asking for newer, fancier digs. They're also asking the public to pay half — or more — of the bill.

Hidden Costs Add Up

Judith Grant Long is a professor of urban planning at Harvard who has studied sports facility deals for over a decade. She tells All Things Considered host Audie Cornish that cities often end up paying far more than their fair share because of hidden costs from new roofs, police details, garbage pickup and a loss from property taxes (most sports facilities don't pay them).

She says those things add up and increase the average public share from 50 percent to 75 percent of a facility's total cost. And she's not alone in seeing through the perceived economic benefits from these deals.

"The consensus amongst economists — and this outcome has really not changed much over the last 20 years — is that new sports facilities deliver very little in the way of new jobs and new taxes that are meaningful," she says.

Grant Long says that's in large part due to the "substitution effect." If someone decides to go to a Major League Baseball game, he is choosing not to do something else — like see a movie or go out to a restaurant.

Some sports teams have tried to sell deals with the promise of larger urban development and neighborhood revitalization. It can help smooth the public approval process, even if the promises don't pan out.

"It turns out to be a fairly convenient thing to package the sports facility in the context of this larger project," she says. "What we're seeing in the short term is that these other kinds of developments simply haven't arrived yet."

So when — if ever — do these deals make financial sense for a city? Grant Long says it's not so bad when cities stick to providing land and infrastructure.

"I think it makes sense for a city to take on certain kinds of costs and to do them thoughtfully," she says. "And on a cost basis, on average, land and infrastructure comes up to about 25 percent of a total facility cost. So the idea [is] that cities would be aiming for a 25-75 split on the partnership."

Tough Decisions

Grant Long says one major reason elected officials agree to pay too much for a new stadium is that no one wants to be blamed for losing a beloved sports team. Just ask Atlanta Mayor Kasim Reed — both the baseball and football teams in his city were asking for help earlier this year. Reed struck a deal with the Falcons to help pay for a new football stadium. But he stunned baseball fans by saying no to the Braves, who wanted a costly upgrade to their ballpark.

Now the storied franchise of Hank Aaron is leaving Turner Field in downtown Atlanta for neighboring Cobb County.

To Reed, the deals were black and white. He says the Falcons arrangement is a "revenue generator" for the city and will be funded through a hotel-motel tax. Additionally, the city won't be on the hook for the debt of the $1.2 billion football stadium.

"The Braves have no revenue stream," he says. "The Braves needed somewhere between $150 million to $250 million in enhancements. ... And at the end of the day, we would've had to take on debt, and the city of Atlanta's general fund would have had to backstop that debt."

Like Grant Long, Reed doesn't believe that stadiums are strong drivers of development. He says that hasn't happened around Turner Field, which was initially built for the 1996 Olympics and later retrofitted. In the end, the math just didn't add up for him.

"You know, I have to live in the world that I live in," he says. "And the fact of the matter is, I've got a city with a $900 million backlog for infrastructure — which is just a fancy word for roads, bridges, sidewalks, green spaces. And I think the people of Atlanta are more concerned with me investing $200 million ... [in infrastructure] than they are me investing $200 million in a retrofit for a multibillion-dollar company."

Still, Reed says the decision was a "very emotional" one for him, and he's experienced some pushback from Braves fans.

"On the day that the team made the announcement, there was a great deal of anger and hurt from people who live in the city and people who live in the region because baseball is a game that respects and values tradition," he says.

But the Braves' owners made a business decision, which Reed says he respects. He offers an analogy.

"We had a terrific Ford that worked really well, we were prepared to keep our Ford running strong, and somebody drove up and offered the Braves a Range Rover and said, 'I'll pay 40 percent of it for you. I'll give you a brand new stadium, I'll let you control real estate development and I'll have the taxpayers pay 40 percent of the bill,' " he says.

He also sympathizes with other elected officials who are under pressure to sign off on big sports facility deals.

"I think municipalities do it because fans have a love of sports in the United States of America. And no leader of a city wants to be a leader that loses a major sports franchise," he says. "And I think all of those are drivers and I think that it gives our professional sports teams a great deal of leverage."

Grant Long, the Harvard University professor, analyzed her database and placed some of the 121 stadiums in use during 2010 into three price ranges based on their capital cost — and the public's share of the investment.

Here are her case studies from around the country:

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

AUDIE CORNISH, HOST:

And I'm Audie Cornish. It's time now for the latest installment in our series Number of the Year. Today, it's $498 million. That's how much the state of Minnesota and the city of Minneapolis have agreed to pay as their share of a new billion-dollar football stadium. When they broke ground this month, a local reporter put this question to Ziggy Wilf, owner of the Minnesota Vikings.

UNIDENTIFIED MAN: Did Minnesotans get a fair deal?

ZIGGY WILF: I believe, absolutely, they did.

CORNISH: This question, is it a fair deal, is an important one and not just for Minnesotans. That's because increasingly, privately-owned sports teams aren't just asking for newer, fancier digs, they're asking the public to pay half or more of the bill. Take Atlanta. Its baseball and football teams both asked the city for help. The Braves wanted a costly upgrade to their ballpark. The Falcons wanted an entirely new stadium.

Together, they added up to a nightmare for Atlanta Mayor Kasim Reed.

MAYOR KASIM REED: No leader of a city wants to be a leader that loses a major sports franchise. And I think that it gives our professional sports teams a great deal of leverage.

CORNISH: We'll hear more from Reed in a minute. But first, some background from Judith Grant Long, a professor of urban planning at Harvard. She says that often when cities agree to pay hundreds of millions of dollars to build a new stadium or ballpark, the price tag doesn't include many hidden costs.

JUDITH GRANT LONG: Such as capital improvements, putting a new roof on the stadium, for example, as well as municipal services. So these are things like collecting the garbage and police details and so forth, as well as a fairly large category - and this one's a little bit controversial - this idea that the sports facility, most of them in the United States, don't pay property taxes.

So these three things combined add a fairly significant chunk to the public sector tab. According to my calculations, it increases the average public share in a deal from 50 percent to 75 percent of the total cost of the facility.

CORNISH: So let's break that down a bit. First, is there any real consensus among economists about whether or not these are economically a good or bad deal for taxpayers?

LONG: Well, the consensus amongst economists, and this outcome has really not changed much over the last 20 years, is that new sports facilities deliver very little in the way of new jobs and new taxes that are meaningful. And in large part, this is because of what's called the substitution effect, which is to say that if someone decides to go to a Major League Baseball game, which is increasingly expensive these days, that they are choosing not to do something else.

So they're not going to a movie. They're not going to a restaurant and so forth.

CORNISH: All right. So what about urban redevelopment? We hear this a lot from lobbyists in different cities when they want to get a stadium going. They say this is going to improve this area and help you develop a whole new area of the city. True or not?

LONG: Well, generally not true, at least in the short term of experience that we have so far. And this is of particular interest to me as a city planner. The results that we have so far are showing that, you know, in many cases, the facility gets built but not much else.

Now, it turns out to be a fairly convenient thing to package the sports facility in the context of this larger project in the sense that it helps with the public approval process. People see a much larger project and they get excited about this larger project.

LONG: Yeah, exactly right. And what we're seeing in the short term is that these other kinds of developments simply haven't arrived yet.

CORNISH: So when exactly does it make sense for a city to take on these costs?

LONG: I think it makes sense for a city to take on certain kinds of costs and to do them thoughtfully. And in my research, I really point to the provision of land and infrastructure as the key areas where cities should be involved in negotiating sports facility support. And on a cost basis, on average, land and infrastructure comes up to about 25 percent of a total facility cost. So the idea that cities would be aiming for a 25-75 split on the partnership, I think, makes sense when viewed through the lens of providing only land and infrastructure in a way that makes sense for the city going forward.

CORNISH: Judith Grant Long, she's a professor of urban development at Harvard, thank you so much for talking with us.

LONG: Well, thank you very much for having with me.

CORNISH: Grant Long says one big reason elected officials agree to pay too much for a new stadium is that no one wants to be blamed for losing a beloved sports team. Just ask Atlanta Mayor Kasim Reed. As we said, the Braves and Falcons both wanted the city's help. Reed struck a deal with the Falcons to help pay for a new stadium but he stunned baseball fans by saying no to the Braves.

And now, the storied franchise of Hank Aaron is leaving downtown Atlanta for a neighboring county. I asked Mayor Reed, why hold onto one team and not the other?

REED: The reason is very simple. One arrangement, the Falcons arrangement is actually a revenue generator for the city.

CORNISH: And it does that through a hotel-motel tax?

REED: Yes. So we receive a share of the hotel-motel tax. If we had not kept the Falcons in the city of Atlanta, we would've lost that revenue stream. In addition, the city of Atlanta does not backstop or have to sign onto the debt for the new $1.2 billion stadium in any way.

CORNISH: So what's the difference then? Tell us what was happening with the Braves deal.

REED: The Braves have no revenue stream. The Braves needed somewhere between 150 million to 250 million in enhancements to the Ted, which is our baseball stadium. And at the end of the day, we would've had to take on debt and the city of Atlanta's general fund would have had to backstop that debt.

CORNISH: One argument that teams often make to their host cities is that, you know, look, these stadiums drive development. They say that they feed local businesses and that it's essentially worth the investment. And the Braves old stadium, Turner Field, or Ted as you called it, is in downtown Atlanta. Why didn't that argument hold water for you?

REED: Because it hasn't driven development. So, you know, I have to live in the world that I live in. And the fact of the matter is, I've got a city with a $900 million backlog for infrastructure, which is just a fancy word for roads, bridges, sidewalks, green spaces. And I think the people of Atlanta are more concerned with me investing $200 million to make sure that we have traffic light synchronization so that I can get folks home to their families, parks for their children to play in, roads that don't have potholes in them, than they are me investing 200 million in a retrofit for a multibillion-dollar company.

CORNISH: Mayor Reed, it sounds like you've had to make this argument many, many times. And I was wondering if you could count out for us the number of voices, constituencies, conflicting interests that are coming at you or any other mayor when they're faced with this kind of deal.

REED: I mean, obviously, it's a very emotional decision. I mean, I love the Braves, right?

CORNISH: But who is it? Is it unions? Is it cities...

REED: No, it really is the fan base. It's the fan base and it's people who love the Atlanta Braves' tradition in the city of Atlanta. And so on the day that the team made the announcement, there was a great deal of anger and hurt from people who live in the city and people who live in the region because baseball is a game that respects and values tradition.

But at the end of the day, Liberty Media, they made a business decision and, you know, we had a terrific Ford that worked really well, we were prepared to keep our Ford running strong, and somebody drove up and offered the Braves a Range Rover and said, I'll pay 40 percent of it for you.

I'll give you a brand new stadium, I'll let you control real estate development and I'll have the taxpayers pay 40 percent of the bill.

CORNISH: You know, in the last 10 years, there have been more than a dozen new professional stadiums that have gone up across the country. And why do you think that municipalities keep doing this, picking up more and more of the cost?

REED: I think municipalities do it because fans have a love of sports in the United States of America. And no leader of a city wants to be a leader that loses a major sports franchise. And I think all of those are drivers and I think that it gives our professional sports teams a great deal of leverage.

CORNISH: Atlanta Mayor Kasim Reed, thank you so much for speaking with us.